Residential property investment in Gisborne delivers returns

The
unassuming provincial city of Gisborne is vying for the
title of New Zealand’s hottest residential property
investment destination – with a three bedroom ‘renter’
in the city selling this month to an out-of-town investor
for a return of almost 15 percent.

Real estate agency
Bayleys this month sold the ex-State house in the city for
$71,000 to an investor from Nelson. The
three-bedroom/one-bathroom property on a 673 square metre
section rents out for $200 a week, and has been occupied by
the same tenant continuously for the past 10
years.

Bayleys Gisborne manager Karen Raureti said: “On
those figures, the property generates an annual return of
14.6 percent – that’s more than three times the current
12-month deposit rates with the big banks, where you’re
lucky to get 4.5 percent interest.”

“This latest sale
is far from an anomaly though. We’ve seen a lot of 10
percent-plus rental yields coming through for residential
investment stock selling over the past year,” she
added.

“Our Nelson buyer noted that a 14.6 percent
return was certainly far better than anything they could
find in their own city – and is certainly way ahead of
anything in the Wellington and Auckland markets where other
Gisborne investors have been assessing values.”

Rental
yields are found by taking the weekly rental return of a
property, multiplying that by the 52 weeks in a year,
dividing that total by the purchase price of the property,
and multiplying that by 100 to give a percentage.

Earlier
this year, ANZ bank produced a research report spotlighting
what it had identified as New Zealand’s ‘hottest’
residential investment locations and suburbs.

Top of the
ANZ’s location list – with a rental return of 8.3
percent was the Dunedin suburb of Forbury, closely followed
by South Dunedin with a yield of 8.2 percent. At the bottom
of the investment scale is the Auckland coastal suburb of
Castor Bay delivering a miserly 2.7 percent return from
rents, closely followed by the adjacent suburb of Devonport
where investors could expect rental returns of 2.8
percent.

Ms Raureti said there was a big pool of
‘Gisborne ‘locals’ who had been investing in
residential real estate in the city for almost a generation,
and who were receiving double-digit returns far better than
those identified in the ANZ report.

“Among that pool is
a considerable percentage of Gisborne ex-pats who now live
elsewhere in New Zealand, but still retain an affiliation
with the region through family connections. For those
ex-pats in the bigger centres, they simply can’t find the
returns where they are living compared to what they can
source in Gizzie, so they buy somewhere they know,” she
said.

“While the capital gains seen in Gisborne may not
be as spectacular as those recorded in the bigger cities
such as Auckland and Christchurch, our rental returns
certainly exceed anything they are producing – so it’s
‘one up’ for us little guys down here,” she
added.

Ms Raureti said residential property investors had
a markedly different psyche to owner-occupiers who bought
homes to live in.

“A property investor calculates a
property’s worth with a calculator. It’s a very cold and
clinical process which looks at the ‘rentability’ of
home – how much they can get per week in rent, and who
will rent it.

“At the other end of the spectrum,
owner-occupiers fall in love with their dream home and make
their value assessment with the heart. By having those two
vastly-different dynamics at play when a house goes up for
sale, you can effectively capture the potential buyer market
on behalf of your vendor,” Ms Raureti
said.

Bayleys is New Zealand's largest full-service real estate company. We offer expertise in the marketing and sale of a wide range of property, including residential real estate, farms and lifestyle blocks, and commercial and industrial property. This includes tourism and business sales such as hotels and motels. We also cover the real estate markets in Fiji and other Pacific Islands.

Bayleys also provides a complete property and facilities service including property management and valuations teams focused on achieving both Owner and Tenant satisfaction.

No other real estate company can match our breadth of coverage across all market sectors throughout New Zealand.

Contact Bayleys Real Estate

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